UAE rolls out affordable insurance scheme to replace bank guarantees

The UAE has started issuing new insurance policies for workers in place of bank guarantees from Monday, the ministry of Human Resources and Emiratisation has confirmed.

The new affordable insurance policy system will seek to guarantee the wages of workers in the private sector as well as the domestic sector.

“Bank guarantees are already being refunded,” the ministry said in a message on Twitter.

Since Yesterday morning, we have started issuing #insurance policies for the new scheme to guarantee the wages of workers in private sector as well as domestic sector.#Bank_gurantees are already being refunded.

More details are available in the following thread:#MOHRE https://t.co/oOvI1kdobA

— MOHRE_UAE (@MOHRE_UAE) October 16, 2018

The ministry has signed an agreement for an insurance pool with the Dubai Insurance Company.

The UAE Cabinet announced in June that it had abolished the mandatory deposit of Dhs3,000 ($817) per worker that had to be paid by private companies, and replaced it with a new insurance scheme that costs Dhs60 ($16) annually per worker.

The insurance policy will cover the workers’ entitlements in terms of end of service benefits, vacation allowance, overtime allowance, unpaid wages, return airline ticket and cases of work injury – in which the coverage amounts to Dhs20,000 ($5,445) per worker.

Private sector companies will be able to recover their bank guarantees upon cancellation of a worker’s declaration of guarantee or the renewal of the worker’s permit and purchase of the insurance policy.

Also read: UAE announces new visa rules for residents, jobseekers and tourists

The newly created scheme is hoped to secure workers’ rights in the private sector and reduce the burden on employers.

UAE Vice President and Prime Minister Sheikh Mohammed bin Rashid Al Maktoum said at the time of announcing the scheme that the change would allow businesses to recover approximately Dhs14bn ($3.81bn) in guarantees already paid out.

Read more: UAE to begin refunding Dhs14bn of deposits to private sector firms

“One of the main objectives of the new insurance scheme is to make doing business in UAE easier and affordable. A two-year insurance policy would cost Dhs120 compared to the current Dhs3000 bank guarantee model,” the ministry said on Twitter.

Nasser Al Hamli, the minister of Human Resources and Emiratisation said: “With the new insurance scheme, the UAE will be the first country to guarantee the wages of all workers in the private and domestic sectors.”